United States Court of Appeals For the Ninth Circuit

No. 7657

IN THE

United States
Circuit Court of Appeals

For THE NINTH CIRCUIT

©

HARRY W. BERDIE, et al.,

Appellants,
US.
CHARLES J. KURTZ, et al.,
A ppellees.

Appeal From the District Court of the United States,
Southern District of California,
Central Division

Petition for Rehearing

Haroitp M. STEPHENS,
Assistant Attorney General,
Perrson M. HAtt,
United States Attorney,
CiypE THOMAS,
Assistant United States Attorney,
Cart McFarRLanp,
Mac ASBILL,
A. H. FELLER,
Special Assistants to the Attorney General.
Setn THOMAS,
Solicitor, Department of Agriculture.
ArtTHuR C. BACHRACH,
Joun J. Apr,
DonaLtp B. MACGUINEAS,
M. Camper O’NEAL,
Attorneys, Agricultural Adjustment Administration,

Attorneys for Appellants.

(eS ae EE ER TSE
Independent-Review, Law Printers, 222 So. Spring St., Los Angeles. TU 1377 |

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ie k,

SUBJECT INDEX

ow ecnnayptal gagdeain 68.55 ee eee eee 1

ile
The Precise Holding of the Majority Opinion in Regard
to the Phrase “In the Current of Interstate or Foreign
(CHORES ” 5 INS eR Np co ee 3

Tis
The Origin and Meaning of the Phrase “In the Current of
Interstate Commerce” as Shown by the Decisions of the

Sopneme Count of the Umited States..........2.-.:..cc.-.--c0---- 4
iB
The Legislative History of the Amendment to Section 8 (2)
and the Proposed Amendment to Section 8 (3)............... 8
iG
maine Appellees Are Not Entitled to Equitable Relief............ 12
III.
The State Court Action for Money is Not an Evasion of
fiememor |urisdiction of the Federal Comurt....................... be
RAN ce a ee codec des ss Sb ec eales fcc daeiiavovadueceuscsiecese-ses 17

Cb NO NS VND AUTHORITIES

Pemrermicural Ady. Act, S€¢. S) Evcisccccccececcccescesesessceseosecccstececceecess 13
fommeey. Uiited States, 194 UJ. S. 486. ince cece cc cece 9
Miieigo Bd. of Trade v. Olsen, 262 U. S. Vaneeecceeeeeceeeeeceee 7
(@ierch etc. v. United States, 143 U. S. 447.000.0000... cence 9
ipemlex etc. v. Deering, 254 U. S. 443..W ne ceneecececeeceee eee )
Berle WV allace, 259 UW. S. 44 cnn ncccccceccccccccecnseceseeencecsseesesennernen 7
© seve ERS) Oke gL) 0)5)1 Eero 10
i@ecen vy. United States (CCA 9), 36 Fed. (2d) 43................ Y)
New York etc. v. Winfield, 244 U. S. 147.2... ceeeeececeee 9
Beene Levy. White (CCA 9), 266 Fed. 765...........-...----- Y)
Pennsylvania etc. v. Commonwealth, U. S. Supreme Court
COEDS ENG CRO sete Se las er 16
Peal Harms v. Wallace, $ Fed. Supp. 975..............e0cc0cce0-.- 2
- 288 INSTT INORIN G0) eee ce ee 1]
Peamord vy. Wallace, 258 U. S. 495 ooo... ceseecceceeeeseneeneeee 6
Saviit and Co. y. United States, 196 U. S. 375. 2.0... cece 4
United States v. Greenwood etc., 8 Fed. Supp. 398........0....... IZ

Whitney v. United States (CCA 9), 8 Fed. (2d) 476.0000... 9

IN THE

United States
Circuit Court of Appeals

For THE NIntTH CIircwit

HARRY W. BERDIE, et al.,

Appellants,
os
CHARLES J. KURTZ, et al.,
Appellees.

Petition for Rehearing

Come Now the appellants and move that the order
affirming the decree of the lower court for a temporary
injunction entered herein, on or about March 4, 1935, be
vacated and set aside and that a rehearing of this cause
be granted on the following grounds:

J. With respect to the interstate commerce feature of
this case, the majority opinion of the court has quite
clearly and fairly stated the position of appellants. (See
majority opinion, pp. 9 and 10). Briefly stated, appel-
lants’ position is that the facts shown by the record
clearly disclose that the intrastate activities of Los An-
geles milk distributors are in the current of interstate
commerce and burden, obstruct and affect interstate com-
merce, and hence are subject to Federal regulation.

IN THE

United States
Circuit Court of Appeals

For THE NINTH CreRcuitT

HARRY W. BERDIE, et al.,

Appellants,
VS.
CHARLES J. KURTZ, et al.,
Appellees.

Petition for Rehearing

Come Now the appellants and move that the order
affirming the decree of the lower court for a temporary
injunction entered herein, on or about March 4, 1935, be
vacated and set aside and that a rehearing of this cause
be granted on the following grounds:

I. With respect to the interstate commerce feature of
this case, the majority opinion of the court has quite
clearly and fairly stated the position of appellants. (See
majority opinion, pp. 9 and 10). Briefly stated, appel-
lants’ position is that the facts shown by the record
clearly disclose that the intrastate activities of Los An-
geles milk distributors are in the current of interstate
commerce and burden, obstruct and affect interstate com-
merce, and hence are subject to Federal regulation.

pee

The majority opinion, while clearly and fairly stating
appellants’ position in this respect, does not decide or
express any opinion on the question whether such facts
constitute an affecting, burdening, or obstructing of inter-
state commerce, so as to justify Federal regulation; in-
stead, the majority opinion holds that regardless of the
effect of intrastate activities upon interstate commerce
in milk and milk products, the language of Section 8(3)
of the Agricultural Adjustment Act indicates that Con-
gress did not intend to exercise any authority over such
transactions.

The majority opinion holds the Los Angeles Milk
License to be void solely upon its construction of the
phrase “in the current of interstate commerce” as used
in Section 8(3). In view of the facts (1) that the ma-
jority opinion has carefully refrained from holding that
the facts disclosed in this record do not constitute an
affecting, burdening, or obstructing of interstate com-
merce, and (2) that the dissenting opinion squarely holds
that such facts justify the Federal regulation of milk
by the Los Angeles Milk License, and (3) in view of the
importance to the Government of the question of statu-
tory construction passed upon by the majority opinion,
appellants are filing this petition for rehearing which is
addressed to the question of statutory construction which
was mot raised or discussed by any of the parties in their
briefs, and, to the proposition—

II. That the court was under a misapprehension in
determining that the appellees were entitled to equitable
relief in that appellees did not allege or prove that they
would be damaged irreparably, or otherwise, by relying
on their legal defenses, and to the proposition that—

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Ill. The court was under a misapprehension in sus-
taining the injunction against the maintenance of a state
court action in that no showing was made that the state
court action for money in any manner interfered with
the jurisdiction of the federal court in the injunction
procedure.

Ife
The Precise Holding of the Majority Opinion in
Regard to the Phrase “In the Current of Inter-
state or Foreign Commerce.”

In reference to interstate commerce, briefly stated, the
majority opinion holds:

1. That the phrase “in the current of interstate or
foreign commerce” as used in Section 8 (3) “is restric-
tive rather than expansive in its effect” (majority
opinion, page 12, last paragraph).

Z. That the amendment of Section 8 (2) on April 7,
1934, by the addition of the words “or in competition
with, or so as to burden, obstruct, or in any way affect,
interstate or foreign commerce” indicates the intention
of Congress to expand the scope of sub-section 2 beyond
that of sub-section 3, which was not similarly amended.

We do not understand the majority opinion to hold
that if the phrase “in the current of interstate commerce”
as originally used in both sub-sections (2) and (3) was
sufficiently broad and comprehensive to include transac-
tions which affect, burden, or obstruct, interstate com-
merce, then the effect of amending 8 (2) without sim-
ilarly amending 8 (3) was, as a matter of law, to change
and modify the meaning of the phrase “in the current
of interstate commerce” as used in Section 8 (3).

pa

In this petition, therefore, we shall respectfully con-
tend that the majority opinion was in error in its con-
struction of Section 8 (3) in limiting the meaning of
“in the current of interstate commerce” in such a fashion
as to exclude those activities which affect, burden, and
obstruct interstate commerce.

A,

The Origin and Meaning of the Phrase “In the Cur-
rent of Interstate Commerce” as Shown by the
Decisions of the Supreme Court of the United
States.

The choice of the phrase “in the current of intengma
commerce” in Section 8 as originally enacted was not a
haphazard one. Had Congress originally intended, as
the majority of this court has held, to restrict the scope
of sub-sections 2 and 3 of Section 8 to transactions them-
selves in interstate commerce, Congress could readily
have said so. The phrase “current of interstate com-
merce” would not then have been used and both sub-sec-
tion 2 and sub-section (3) would have been concerned
with the handling of agricultural commodities “in inter-
state commerce.”

Congress did not use the language which it woula
naturally have used had its intention been as the ma-
jority of this court has construed it to be. Instead, it
used a phrase which, by prior legislative usage and hy
decision, had come to have a broader meaning. The
phrase “current of commerce” originated in the decision
of the Supreme Court in Swift & Co. v. Umated States.
196 U. S. 375, where the court said (pages 39S vamd

ae.

399), in answer to the objection that the purchase and
sale of cattle in the stockyards in Chicago did not con-
stitute interstate commerce because the transactions oc-
curred within the border of a single state:

“Commerce among the’ states is not a technical
legal conception, but a practical one, drawn from
the course of business. When cattle are sent for
sale from a place in one state, with the expectation
that they will end their transit, after purchase, in
another, and when in effect they do so, with only
the interruption necessary to find a purchaser at
the stock yards, and when this is a typical, con-
stantly recurring course, the current thus existing
is a current of commerce among the states, and the
purchase of the cattle is a part and incident of such
commerce.”

The court conceived of the continuous movement of
cattle from the plains of the West and Southwest
through the packing plants to the consumption centers
in the East as a current of commerce among the several
states and held that the intrastate character of individual
transactions occurring in the movement did not place
them beyond the power of national regulation.

The phrase used by the Supreme Court in the Swift
case, to express its intention to subject intrastate trans-
actions to Federal control, was adopted by Congress in
formulating the Packers and Stockyards Act of 1921.
After defining the term “commerce’’ as used in that Act,
Congress further stated in Section 2 (b) that ‘a trans-
action in respect to any article shall be considered to be
in commerce if such article is part of that current of
commerce usual in the livestock and meat-packing indus-

2654

tries * * * .” The purpese of Gongress was clear umn
intended to include within the scope of the Act transac-
tions occurring in the movement of the commodity which,
considered by themselves and apart from the constant
interstate movement, were intrastate in character; and
to carry Out its intentions, Congress adopted a phrase
of known content, “current of commerce.” The validity
of the Packers and Stockyards Act of 1921 was chal-
lenged in Stafford v. }Wallace, 258 U. S. 495, upon the
ground that the purchases and sales of cattle in the
stockyards in Chicago occurred within the boundaries
of a single state and so were beyond congressional power.

¢

The court recognized that by the use of the phrase “cur-
rent of commerce” Congress had appropriately expressed
its intention to bring intrastate transactions under Fed-
eral control, and the validity of the Act was sustained.

Tn® Corie Sai! (Go, 520):

“It is manifest that Congress framed the Pagivaye
and Stockyards Act in keeping with the principles
announced and applied in the opinton in the Swift
case. The recital in Section 2 ()) of title [games
Act quoted in the margin leaves no doubt of this.
The Act deals with the same current of business,
and the same practical conception of interstate com-
merce.

Again, when Congress sought to impose upon the
boards of trade throughout the country a national svs-
tem of regulation in the Grain Futures Act of 19Z2aim
adopted the same technique. After defining the phrase
“interstate commerce” as used in the Act, it added to the
definition Section 2 (b) which provided that “a trans-

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action with respect to any. article shall be considered to
be in interstate commerce if such article is part of that
Gaurrent of commrerce usual in the grain trade * * * .”
The validity of the Act was challenged in Chicago Board
Oy brade v. Olsen, 262 U. S. 1, upom the ground that
the impact of the regulaticn was upon transactions in
grain futures which had theretofore been held not to be
interstate commerce. (Hill v. Wallace, 259 U. S. 4.)

In Hill v. Wallace, the court had said (p. 69):

“It follows that sales for future delivery on the
Board of Trade are not, in and of themselves, in-
feremite commerce. Tey cannot cote “Within the
regulatory power of Congress as such, unless they
are regarded by Congress, from the evidence before
it, as directly interfering with interstate commerce
so as to be an obstruction or a burden thereon.”

In the Grain Futures Act of 1922, which was before
the court in the Olsen case, Congress had manifested
its intention to subject to Federal control intrastate
transactions in sales for future delivery by the use of
the phrase “current of commerce.” The validity of the
Act and the aptness of the phrase “current of commerce”
to describe transactions “directly interfering with inter-
state commerce so as to be an obstruction or a burden
thereon” were sustained by the Supreme Court.

The declaration of emergency and the declaration of
policy quoted in our original brief), which preface the
Agricultural Adjustment Act indicate clearly that Con-
gress intended by the Act to alleviate the economic crisis
in agriculture, by increasing the purchasing power of the
American farmer. The declaration »f emergency con-

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tains a finding by Congress that the prevailing critical
conditions in the basic industry of agriculture “have
affected transactions in agricultural commodities «with a

Jk
*

national public mtercst * * * and render imperative the
immediate enactment of Title I] of this Act.” The pow-
ers which Congress vested in the Secretary of Agricul-
ture to accomplish the important purposes of the Act
are broad and comprehensive. It is clear that Congress
intended to exercise to the full the powers vested in it
by the Constitution in order to alleviate the economic
crisis “more serious than ever.” It would be a strained
construction of the Act which would permit the Secre-
tary of Agriculture under Section 8 (3) to increasemtive
purchasing power of only that portion of each agricul-
tural commodity which physically moves in interstate
commerce. That Congress did not intend that Section 8
(3) should be so restrictively interpreted is further
borne out by a consideration of its legislative history.

B.
The Legislative History of the Amendment to Sec-
tion 8(2) and the Proposed Amendment to Sec-
tion 8(3). .

Section 8(2) of the Act was amended on April 7, 1934,
by the addition of the words, “or in competition with, or
so as to burden, obstruct, or in any way affect, interstate
or foreign commerce.” Section 8(3) was not similarly
amended. Concerning the effect of the amendment to
Section 8 (2), the prevailing opinions states: “This dif-
ference in language marks a definite change of thought.”
The minority opinion does not adopt this view, but holds

eer 9 ee

that Congress intended to and did subject to national
regulation intrastate transactions such as those involved
in the case at bar.

In such a situation, where there is doubt as to the
intention of the legislative body, it is settled that resort
will be had to the legislative history of the bill, and par-
ticularly to the reports of committees of Congress, in
order to determine the legislative intent.

Church of the Holy Trinity v. United States, 143
U. S. 447;

Duplex Preimig Press Co. v. Deering, 254 U. 5.
443, 474;

Binns v. United States, 194 U.S. 486, 495;

WY. C. R..Go. v. Woetfeld, 274 U. Sal47, 150;

Whitney v. Umited States, (C. C. A. 9), 8 Fed. (2d)
476, 478;

orden vu. Umuted States (C. C. A. 9), 36 Fed: (2d)
43;

NG Farge How. Wiite, (C. ©. A. 9), 266 Fed. 765.

The bill to amend Section 8(2) of the Act originated
in the House of Representatives, was passed by that
body, and after amendment was passed by the Senate.
Uitesiiouse refused to concur in the Senate amendments
and the Senate refused to recede from its amendments.
Conference committees were appointed.

Th report of the House Conference Committee explains
the purpose of the Senate amendments. (Senate Confer-
ence Committee Reports are not printed). Concerning
the effect of the amendment here involved, which orig-
inated in the Senate, the House Conference Committee
on March 26, 1934 made the following statement in its

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report to the House (73d Congress; 2nd Session, House
Report No. 1051, p. 4):

“Amendment 'No. 6: This amendment amends the
provision of the Agricultural Adjustment Act which
authorizes the Secretary of Agriculture to enter into
marketing agreements. It broadens the class of par-
ties with whom agreements can be made to include
producers, and clarifics the provision so that express
authorisation is given to enter ito agreements with
parties handling agricultural commodities and prod-
ucts ut competition with or affecting iiterstate or
foreign commerce.” (Italics ours).

The intention of Congress is plain. It was not to ea-
pand the scope of the original provision, but rather to
clarify the language and to state ecapressly what had al-
ways been the legislative intent.

A bill amending Section 8(3) of the Act so that the
scope of the delegated power with respect to marketing
agreements and licenses would be expressed in identical
language was introduced in the Senate during the second
session of the 73d Congress. This bill was introduced on
March 28, after the Conference Report on the amend-
ment to Section 8(2) was approved by the House, and
the day before it was approved by the Senate. The pro-
posed amendment to Section 8(3) authorized the Secre-
taiy—=

“(1) To prohibit processors, distributors (includ-
ing producers and associations of producers, who
are processors or distributors) and others from en-
gaging in the handling of any agricultural com-
modity or product thereof, or any competing com-
modity or product thereof, in the current of or in

age

competition with, or so as to burden, obstruct, or
in any way affect, interstate or foreign commerce
without a license, and (II) to issue licenses to permit
necee-ene * ~ 10 eleice ime licm Manding * * *.”

This bill, introduced late in the session, was not enacted
and was never submitted to a vote in either House. It
was introduced only in the Senate and was considered by
the Senate Committee on Agriculture which reported the
bill out of committee with the recommendation that it do
pass. Concerning the effect of this proposed amendment,
the report of the Senate Committee on Agriculture stated
(73d Congress, 2d Session, Senate Report No. 1120,

> ae

“The first paragraph, lettered (A), follows the
language of the first two sentences of section 8(3)
isthe present act, except im the followine respects:
(a) It states clearly the implied power the Secretary
has under the present licensing provision to prohibit
those who have no licenses, when licenses are re-
quired, from engaging in the handling of agricul-
tural commodities so as to affect interstate or for-
eign commerce.’ (Italics ours).

This report indicates beyond doubt (a) that Congress
considered the existing language of sub-section (3) ade-
quate to express its intention to exercise its control over
those transactions which affect, obstruct or burden inter-
state commerce, and (b) that Congress considered that
the addition of the words emphasized by the majority
opinion of this court would effect no change of meaning,
but would merely clarify the statement of powers already
granted.

a=

The statement of District Judge Baltzell in the opinion
in United States v. Greenwood Dary Farms, Inc., 8 Fed.
Supp. 398 that this proposed amendment “failed of pas-
sage” is inaccurate. The term “failed of passage’ is
properly applied when a bill is submitted to a vote upon
the question of whether or not it shall pass, and fails to
secure the requisite number of votes. This bill was never
submitted to any vote. As District Judge Chestinme
pointed out in his opinion in Royal Farms Dairy, Inc. v.
Wallace, 8 Fed. Supp. 975, the amendment had appar-
ently “never been brought to a vote in Congress.”

To summarize:

(1) The report of the Tlouse Conference Committee
on the amendment to Section 8(2) shows that the amend-
ment was intended only to clarify the language of this
section and was not intended to broaden the scope of its
operation.

(2) The Senate Committee Report upon the proposed
amendment to Section 8(3) shows that Congress con-
sidered the existing language of Section 8(3) sufficiently
broad to include intrastate transactions, and that the ad-
dition of the words inserted by amendment in Section
8(2) would not alter the scope of the section but would
merely state clearly the power already conferred upon
the Secretary of Agriculture.

ie
The Appellees Are Not Entitled to Equitable Relief

The only reference in the opinion to the cause for
equity intervening is that the “actions of the appellant

’

constitute trespass.” This statement is evidently under a

=.

misapprehension of the facts appearing in the record in
this case.

The court in the majority opinion further states that
the only thing the appellees are seeking to establish is
“their right to conduct their business under the constitu-
tional guarantee of freedom under the right of contract.”
It is shown by the record and recognized as a fact by
the majority opinion that the appellees voluntarily ceased
to do business. It is submitted that no trespass can be
effected upon any person’s rights or against any persons
if they voluntarily cease to operate. Trespass compre-
hends injury or the ability to inflict injury, and certainly
no injury can be inflicted upon any person who is not in
a position to be injured, such as appellees in this
case who voluntarily quit business. None of the appel-
lants had any dealings with the appellees since they had
ceased to do business. As to any punishment or legal
action that might be taken against them for any alleged
violation of the act, the appellant Peirson M. Hall is the
only one who could have become active in enforcing the
law and there was no showing that he had threatened
to do so or that he had been requested to do so by the
Secretary of Agriculture or the Attorney General, with-
out which previous request as appears from the face of
the Agricultural Adjustment Act he was without any
Wormer or authority. (Sec. 8 (E), (7) dg Adj. Ack)

The only action as against appellees reflected in
the entire record is the demand of the officials who
had been in charge of License No. 17 that such ap-
pellees pay to such officials and account for such monies
as they had collected and were holding under and

Aico

on

The statement of District Judge Baltzell in the opinion
in Uiited States v. Greenwood Dairy Farms, Inc., 8 Fed.
Supp. 398 that this proposed amendment “failed of pas-
sage’ 1S inaccurate. The term “failed of passage @aic
properly applied when a bill is submitted to a vote upon
the question of whether or not it shall pass, and fails to
secure the requisite number of votes. This bill was never
submitted to any vote. As District Judge Chestnut
pointed out in his opinion in Royal Farms Dairy, Inte. v.
Wallace, 8 Fed. Supp. 975, the amendment had appar-
ently “never been brought to a vote in Congress.”

To summarize:

(1) The report of the House Conference Committee
on the amendment to Section 8(2) shows that the amend-
ment was intended only to clarify the language of this
section and was not intended to broaden the scope of its
operation.

(2) The Senate Committce Report upon the proposed
amendment to Section 8(3) shows that Congress con-
sidered the existing language of Section 8(3) sufficiently
broad to include intrastate transactions, and that themad=
dition of the words inserted by amendment in Section
8(2) would not alter the scope of the section but would
merely state clearly the power already conferred upon
the Secretary of Agriculture.

Il.
The Appellees Are Not Entitled to Equitable Relief

The only reference in the opinion to the cause for
equity intervening is that the “actions of the appellant

bd

constitute trespass.” This statement is evidently under a

pm)

misapprehension of the facts appearing in the record in
this case.

The court in the majority opinion further states that
the only thing the appellees are seeking to establish is
“their right to conduct their business under the constitu-
tional guarantee of freedom under the right of contract.”
It is shown by the record and recognized as a fact by
the majority opinion that the appellees voluntarily ceased
to do business. It is submitted that no trespass can be
effected upon any person’s rights or against any persons
if they voluntarily cease to operate. Trespass compre-
hends injury or the ability to inflict injury, and certainly
no injury can be inflicted upon any person who is not in
a position to be injured, such as appellees in this
case who voluntarily quit business. None of the appel-
lants had any dealings with the appellees since they had
ceased to do business. As to any punishment or legal
action that might be taken against them for any alleged
violation of the act, the appellant Peirson M. Hall is the
only one who could have become active in enforcing the
law and there was no showing that he had threatened
to do so or that he had been requested to do so by the
Secretary of Agriculture or the Attorney General, with-
out which previous request as appears from the face of
the Agricultural Adjustment Act he was without any
power or authority. (Sec. 8(E), (7) Agr. Adj. Act.) —

The only action as against appellees reflected in
the entire record is the demand of the officials who
had been in charge of License No. 17 that such ap-
pellees pay to such officials and account for such monies
as they had collected and were holding under and

ee

by virtue of said License No. 17, and for which a suit
had been brought in the State courts of California. Cer-
tainly the enforcement of a right in the court having
jurisdiction to adjudicate that right cannot be considered
as a trespass. It does not appear from the record that
the $52,000 alleged to be in the possession of appellees
is the property of the appellees, and appellee’s possession
of said money should not be protected in a court of con-
science. It was the property of the producers of milk
which those producers authorized the appellees to retain
from money which those producers were entitled to re-
ceive and which retention of money by appellees was
authorized for one specific purpose. namely, to be used
_ in conformity with the provisions of License No. 17. Ne
authorization by those producers to appellees to bring the
instant suit is shown in the record, nor is any consent
shown in the record. It is submitted that the action of
the appellees in deducting the $52,000 from the producers
of milk from whom they bought the milk constituted a
contract and created in the hands of appellees a trust
fund. The effect of the court’s opinion is to enable ap-
pellees to hold this money and not to be required to
account therefor. Certainly any legal defense appellees
might have to an action to account for that money could
be fairly asserted in a court of law and did not warrant
the interference of a court of equity by injunction. It is
thus seen that instead of any injury being threatened to
appellees the injury occurs to those who are not before
this court, namely, the producers of milk.

Section 3440 of the Civil Code of the State of Cali-
fornia is intended to prevent debtors from committing a

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fraud upon their creditors by transferring their property
without notice. It is shown by the Record (R. 303) that
the appellees in the instant matter transferred their
assets and property on the 30th day of July, 1934, with-
out compliance with the provisions of said Section 3440
Of the Civil Code of the State of California. The ap-
pellees having violated the state statutes intended to pre-
vent fraud are in a position of coming into a court of
equity and securing an injunction to protect them in that
conduct.

10
The State Court Action for Money is Not an Evasion
of the Prior Jurisdiction of the Federal Court

The majority opinion dismisses the injunction of the
state court actions by the mere statement that Section
p79 ot ‘Title 28, U. S. C. A., has no application where
the jurisdiction of the federal court has been invoked
previous to the action of the state court. This is either
a misapprehension of the facts involved in this case or
of the law applicable thereto. The Record shows that
the federal court action was filed January 11, 1934
(R. 48). No injunction was granted on that bill. Appel-
lants Milk Producers, Inc., on the 19th day of July, 1934,
filed an action in the Superior Court of the State of
California in and for the County of Los Angeles, against
appellees Lucerne Cream and Butter Company and Safe-
way Stores, Inc., for the recovery of $18,454.01 (being
a portion of the $52,000 alleged to be held by all
appellees) and at that time no judgment had been ob-
tained and no injunction was in force in the federal
court in the within action or any action between the

ae

parties. The Supplemental Bill of Complaint was filed
September 4, 1934 (R. 234). The entire cause of action
is stated in the supplemental bill and only seeks to enjom
the defendants therein (appellants here) from enforcing
the Milk Licenses. The within action is strictly an action
im personam as distinguished from an action in rem and
the court did not in any manner assert any jurisdiction of
the property of any of the parties to the suit. The state
court action, as alleged in the Supplemental Bill of Com-
plaint, and as set out in the evidence (R. 300) was only
for the recovery of money which it was alleged appellees
had in their possession by virtue of the Milk License and
which did not belong to them. All demands for money
from appellants, amounting to the sum of $52,000
(R. 303) was of the same nature. In the state@eon
actions, no effort was made to take possession of the
property of the parties nor did the state court in any
manner assert any jurisdiction which was in the least in
conflict with the injunction action pending in the District
Court. Under such conditions even though the subject
matter is the same, the state court and the federal court
actions may be maintained at the same time and the
federal court cannot enjoim the state court action. That
such is the law was definitely decided by the Supreme
Court of the United States on the 4th day of February,
1935, in the case of Pennsylvania General Casualty Com-
pany vs. Commonwealth of Penisylvania, being case No.
431—-October Term, 1934, ............ ie Sees In that case
Mr. Justice Stone writing the opinion for the court said:

(p. 4) “Where the judgment sought is strictly
ut personam, for the recovery of money or for an

7 —

injunction compelling or restraining action by the
defendant, both a state court and a federal court
having concurrent jurisdiction may proceed with
the litigation, at least until judgment is obtained in
one court which may be set up as res adjudicata in
pie other.”

That case seems to fully determine the matter that the
state court actions should not have been enjoined in this
case.

Conclusion

The foregoing legislative history was not before this
court when its opinion was rendered. In view of this
legislative history, we earnestly contend that the ma-
jority opinion was in error in holding that the amend-
ment to Section 8 (2) of the Agricultural Adjustment
Act marks “a definite change of thought.” This ques-
tion of statutory interpretation, here presented, is one of
great importance to the Government, and the decision
of this question will have very important practical con-
sequences.

Apart from this question of statutory construction,
the dissenting opinion in this case has squarely held that
the economic facts, disclosed by this record, justify the

Federal regulation of milk as contained in the Los An-
geles Milk License.

It is earnestly requested that this court grant a peti-
tion for rehearing on the three above mentioned ques-
tions and upon such hearing hold that the Federal
regulation contained in the Los Angeles Milk License

=e

is lawfully justified and that the decision of the lower
court should be reversed.
HaAroLp M. STEPHENS,
Assistant Attorney General,

PEIRSON Vibe) ae
United States Attorney,

CLYDE THOMAS,
Assistant U. S. Attorney,

CarL McFAartanp,
Mac ASBILL,
A] A PeLtcer.
Special Assistants to the
Attorney General,
SETH THOMAS,
Solteitor,
Department of Agriculture.
ARTHUR C. BACHRACH,
Joun J. ABT,
Donatp C. MAcCGUINEAS,
M. CAMPER O’NEAL,
Attorneys,
Agricultural Adjustment
Adminstration.

Attorneys for Appellants.

CERTIAIG wis
I hereby certify that the foregoing petition is, in my
Opinion, well founded in law and should be granted and

is not interposed for delay.
Prirson Ni Eis
Umited States Attorney.